At the top of the list of “must have” countries on which the U.S. Treasury Department needs to force submission to the “Foreign Account Tax Compliance Act” (FATCA) is our closest ally and biggest trading partner: Canada. Unless Ottawa agrees to sign on the dotted line to permit enforcement of this ill-conceived U.S. law against its own Canadian institutions and citizens, prospects for compelling the rest of the world to fall into line lose all credibility.

According to Treasury’s earlier expectations, Ottawa was to have knuckled under by the end of 2012. That didn’t happen, though the Department continues to make increasingly absurd and nonfactualclaims that the world is stampeding to sign so-called “intergovernmental agreements” (IGAs) that enlist foreign governments as enforcers for the IRS. The first one to run up the white flag, unsurprisingly, was the United Kingdom, which has already finalized regulations that blatantly enforce this foreign (i.e., American) law on British institutions and citizens (“The International Tax Compliance (United States of America) Regulations 2013”), at the cost of hundreds of millions if not billions of pounds – in return for nothing from the U.S. (Can anyone imagine Congress’s passing a law authorizing the Treasury Department to issue regulations on American firms and citizens to impost The International XYZ Compliance (China, France, Germany – take your pick) Regulations 2013?)

Standing Up for the Rights and Civil Liberties of Canadian Citizens and Residents

To be fair, Prime Minister Harper and Minister Flaherty are on record as objecting to FATCA in principle. But as with officials of other governments around the world, they have been subject to dire threats of sanctions from the Treasury Department, misguided pleas from some financial sectors that an IGA would lessen the negative impact of FATCA (it won’t), and a cheerleading section of tax lawyers, accountants, consultants, and software firms anticipating a compliance pig-out. This has seriously distorted Canadian officials’ awareness of their available options.

Now comes some serious counter-pressure from the Opposition, which may help clarify where Canada stands. While smaller parties like the Progressive Canadians (no representation yet in the House of Commons) and Greens (one Member, Elizabeth May) have been commendably forthright in their resistance to FATCA, the major Opposition party, the New Democratic Party (NDP), has been largely silent, or even passively supportive of FATCA in the mistaken belief it is merely a measure directed against American “tax cheats.”

The NDP still hasn’t come out against FATCA as such. But in a significant development, Murray Rankin, the NDP’s Official Opposition Critic for National Revenue, wrote to Minister Flaherty on September 25 laying out standards that must not be crossed in an IGA. (For denizens of the country south of the 49th parallel who may not be familiar with Canada’s parliamentary system, the “Official Opposition Critic” is the equivalent of “Shadow Minister” in the British system – the Opposition Member of Parliament who would take over the designated Ministry if the NDP “Shadow Cabinet” replaces the Conservatives.)

In his letter, Rankin expresses “serious concerns” regarding Flaherty’s negotiations with Treasury to “oblige Canada to enact laws and regulations requiring Canadian financial institutions to comply with this U.S.-based legislation,” i.e., FATCA. He also cites the “lack of transparency” and consultation in the “closed door negotiations.” Exactly so. What is being hidden from not only the Opposition but from the public?

In addition,

“New Democrats are concerned with the prospect of a foreign nation unilaterally imposing obligations on Canadian banks to disclose personal information. The Canadian Government has a responsibility to protect Canada’s tax base, and while we understand the United States’ desire to protect their own tax base, this should not come at the cost of the rights of individuals residing in our own country. Cracking down on tax cheats should occur through international cooperation rather than unilateral action.

“What’s more, the secrecy of the negotiations over this agreement has left Canadians in the dark as to the integrity of their personal banking information. The Canadian government should be standing up for the civil liberties of Canadians. Furthermore, the Conservative government must ensure that any agreement reached is fair for Canada.

“In the interest of transparency, fair taxation and respect for privacy rights, we are asking the government to reject any agreement that violates the rights [of] Canadians or that fails to offer Canada equal benefits to those provided to the United States.” [emphasis added; the full text of the Rankin letter appears at the end of this bulletin.]

Opposing a Bad IGA Means Opposing FATCA

The last part is particularly important. The fact is, because the U.S. Treasury Department is only willing to negotiate certain details of the supposedly reciprocal one-size-fits-all IGA text (virtually identical to the one signed by the UK, Germany, and handful of other countries), there can be no IGA which Canada could possibly sign that would not violate Canadians’ rights. Nor could any IGA the Treasury Department conceivably would sign with Ottawa offer Canada “equal benefits” because of differences in the two countries tax systems – even if Treasury’s promises of reciprocity were honored, which they won’t be.

In short, whether it was Rankin’s intention or not, his letter essentially is saying the NDP will oppose the IGA currently being negotiated by Flaherty. Indeed, since the same defects he identifies in his letter – violations of the rights and civil liberties of Canadian citizens and residents (“individuals residing in our own country”), inequality with the U.S. – would apply if Canada allows extraterritorial enforcement of FATCA even without an IGA, Rankin’s letter is tantamount to opposing FATCA itself.

In Canada, as in much of the rest of the world, the question of how to face up to the FATCA threat has been poisoned by the baseless belief that no alternative is available. (For example, one prominent Canadian financial industry leader critical of FATCA has said that financial institutions have “no choice but to comply with U.S. law because the penalties can be onerous — a 30-per-cent tax on U.S.-source income, . . . authorities around the world have come to the conclusion they must deal with the United States to make this as administratively feasible as possible.”) But dealing with the Treasury Department “to make this as administratively feasible as possible” can mean only walking right into the IGA sellout against which Rankin rightly warns. It’s a result that no one in Canada could possibly welcome, except for a few who might share the views of U.S.-born Canadian commentator and FATCA fan Diane Francis, who’s at least honest about favoring Canada’s absorption by her former country . . .

Time for All Canadians to do the Right Thing – and Americans Too

At the time of this RepealFATCA.com bulletin, Flaherty had not made any public answer to Rankin’s letter, though it’s conceivable he has done so privately. (The letter was also CC’d to Peggy Nash, Official Opposition Critic for Finance – NDP’s “shadow” claimant for Flaherty’s job!)

It’s in the interest of neither Canadians nor Americans to keep this matter under wraps. The Opposition (including the Liberals as well as the NDP) needs to challenge the Harper Government to come clean about what they’re preparing to give away to the Treasury before any IGA is signed, not afterwards. On the merits, the Government should welcome such an inquiry, as it would give Harper, Flaherty, and other principled Members of the ruling Conservatives an opportunity to jump out of the dead end they’ve been led into and stand up for Canada’s sovereignty and Canadians’ rights. They should walk away from the IGA negotiating table, and tell Treasury that Canada’s answer on FATCA is just, plain No.

A firm, public rejection of FATCA from Ottawa, with an IGA or without it, and a preparedness to implement any necessary countermeasures if Treasury is foolish enough to try to impose FATCA unilaterally, would be the surest way to avoid its “onerous penalties.” Ottawa’s rebuff would in turn strike a major blow against the already faltering IGA process and set the stage for repeal of “the worst law most Americans have never heard of.”

James George Jatras

++++++++++++++

Notice: The foregoing may be posted, republished, or quoted with attribution.

As Official Opposition Critic for National Revenue, I am writing to express my serious concerns regarding negotiations with the United States over the implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).

Currently, Canada is engaged in closed door negotiations with the U.S. over an Intergovernmental Agreement (IGA) for the implementation of FATCA in Canada. Such an agreement could oblige Canada to enact laws and regulations requiring Canadian financial institutions to comply with this U.S.-based legislation. New Democrats have serious concerns about the lack of transparency and consultation during these negotiations and the potential for such an agreement to infringe on the rights of Canadians and fail to offer reciprocal benefits to both parties.

Reports suggest that if implemented, an IGA may require Canadian banks, investment funds and other financial institutions to disclose annually to the U.S. Internal Revenue Service (IRS) information on accounts held by American citizens, including dual citizens in Canada. Failure to disclose account information could result in a withholding tax applied to U.S. income earned by the institution or by the account holder. We are concerned that these negotiations may allow the United States to bypass the established exchange of information between the IRS and the Canada Revenue Agency and instead get information directly from Canadian financial institutions. Concerns have been raised that such a system could potentially violate existing Canadian privacy laws. Furthermore, at this time it is unclear if reciprocal information would be granted in return.

New Democrats are concerned with the prospect of a foreign nation unilaterally imposing obligations on Canadian banks to disclose personal information. The Canadian Government has a responsibility to protect Canada’s tax base, and while we understand the United States’ desire to protect their own tax base, this should not come at the cost of the rights of individuals residing in our own country. Cracking down on tax cheats should occur through international cooperation rather than unilateral action.

What’s more, the secrecy of the negotiations over this agreement has left Canadians in the dark as to the integrity of their personal banking information. The Canadian government should be standing up for the civil liberties of Canadians. Furthermore, the Conservative government must ensure that any agreement reached is fair for Canada.

In the interest of transparency, fair taxation and respect for privacy rights, we are asking the government to reject any agreement that violates the rights Canadians or that fails to offer Canada equal benefits to those provided to the United States.

In light of the important issues at stake, we urge the government to bring transparency to this process and inform Parliamentarians on the state of negotiations.

In response to his recent letter to Jim Flaherty, I wrote to encourage Murray Rankin. Part of that letter:

“The administration of FATCA – specifically discrimination in banking and finance based upon “indicia of U.S. birthplace – is currently unlawful in Canada under the Charter and Human Rights laws. Only an act of Parliament can enable FATCA here. However, a Canadian IGA to enable FATCA would be the first law in Canadian history to discriminate against an entire class of Canadians based upon birthplace. Canada’s estimated 1,000,000 so-called “U.S.-persons” are a significant constituency – this issue could directly effect more than 3% of Canada’s population.

As you are likely aware, noted constitutional expert Peter Hogg has spoken strongly against FATCA. In a letter to Department of Finance Mr. Hogg warned that a FATCA agreement with the United States would likely be unconstitutional and in violation of Section 15 of the Charter. He wrote: “To the extent that any implementing legislation adopts provisions similar to those found in the Model IGA, in my opinion, the legislation would violate S. 15 of the Charter… The source of this problem is the fact that the Model IGA requires financial institutions to treat people differently based on such innate characteristics as place of birth or citizenship…”
His full letter is here:https://www.greenparty.ca/multimedia/2013-03-13/peter-hogg-letter

The U.S. government is asking the Canadian government to create two classes of Canadian citizens and residents. The first class: those who have a right to private banking information, and a right to not be discriminated against because of their national origin. The second class: Canadian citizens and permanent residents who are also so-called “U.S. Persons”, who would lose these rights. And the selection of the people for the second class (in other words, who is a “U.S. Person”) is made in a foreign state.

The attribution of “U.S.-person-hood” and “U.S. tax residency” based solely upon a U.S. place of birth is the “fruit of a poisoned tree” – and that poisoned tree is national origin discrimination. It is remote to claim that a Canadian citizen who was born in the US decades ago, and subsequently has no concrete tie of residence or economic activity in the US, is somehow a “U.S. tax resident”. It is remote because it is based solely on foreign laws, and it is imposing this definition upon certain citizens of Canada and is not based not upon economic nexus or residency. The concept of “U.S. person” put forth by FATCA is build on a foundation of sand: national origin discrimination.

As well, the Canadian Human Rights Act governs chartered banks in Canada. “Ethnic or National Origin” is an enumerated ground for discrimination. Canadian banks clearly should not be asking their customers where they were born.”

Tricia will do best work on this. I’ve sent it to some News Tips emails for different media sources. Hope some take note of this — or they are not doing their job / are blind and deaf to this absurdity.

@wondering
Excellent letter, but I recommend you also send it to Jim Flaherty. Honestly I think it will have more effect and impact with him. The government needs to be told that Canadians won’t stand for anyone having second-class citizenship in Canada, by as many Canadians as possible. Until the next election, likely not until 2015, it’s the government that has the majority of seats. There isn’t a whole lot the NDP can do to stop something the government is prepared to whip their backbenchers into doing, even assuming the whole NDP caucus and leadership are on-side with this. Which I hope they are; they damn well should be, but I have my doubts (as I’ve already expressed on another thread here and at Sandbox).

Also send it to Mulcair. The problem isn’t Rankin; I think it’s Mulcair. Rankin “gets it,” but his leader doesn’t seem to. Or if he does, he’s being unacceptably quiet about it. Don’t hold your breath for a reply from Mulcair; I was until a couple of weeks ago a party member, and he never even acknowledged multiple emails to him from me or anyone else I know for that matter.

Trudeau and the Liberals are I think a waste of space on this and a lot else, but maybe send it to them too. And the Greens “get it,” and Elizabeth May isn’t about to reverse that. She’s on-side on this.

If you’re in a riding that’s having a by-election (whenever Harper gets around to calling one), go to an all-candidate’s meeting and raise hell over this. Or, if you live in a convenient distance from one of those four ridings, there’s nothing preventing you from dropping in at one of those meetings and asking a question. I’ve never been asked to show ID with address at an all-candidates’ meeting, ever.

I did send it to Flaherty (at his parliamentary address), and I’m sure others have sent it to him too. If the Government walks away from the IGA negotiations, it won’t be because they suddenly realize there’s no benefit to Canada (they know that) or that it’s wrong (they know that too). It will be because the Opposition and media have called them on it for the sellout it is.

Yes, of course the Conservatives are the majority and can, in theory, pass anything they want. The issue isn’t winning a parliamentary vote after an IGA is signed, it’s blowing the whistle on them publicly to make it difficult for them to sign it. Right now, they feel they can secretly sell out to Treasury, give away anything, including Canada’s sovereignty (Diane “Merger” Francis, call your office!), and no one will make a squawk about it.

That’s why Rankin’s letter is important as a public shot across the bow. Right now, it’s important to push for more noise. That’s the only way this can matter.

@Shubert
I sent a similar letter to Flaherty about 2 weeks ago, with some of the same comments.
Also sent same to Peggy Nash.
That was prior to the Rankin letter, so a brief follow-on regarding the Rankin letter is worthwhile.
Had been reading about legal concepts of “remote claims” and “fruit of a poisoned tree” so added that to the argument.

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